During a routine tax audit two years ago, Tractor tavern owner Dan Cowan was hit with a $220,000 bill from the state Department of Revenue (DOR) for having a dance floor where people could dance.
"I’ve never dealt like anything in my life," says Cowan, who managed to argue the crippling amount down to $91,000 on appeal. "At that point, my options were to take the [DOR] to court and have my fees go back up to $250,000, or pay the $91,000. I'm taking it from my retirement."
But a bill introduced in the Senate Ways and Means Committee yesterday would prevent nightclubs and bars with dance floors from being slapped with the 9.5 percent retail sales tax in the future. SB 5613, introduced by state Senator Ed Murry (D-Seattle), would clarify that sales tax should not be applied to "the opportunity to dance provided by an establishment in exchange for a cover charge." It may seem like a modest tweak but it could have far-reaching implications for small music venues, nightclubs, and nonprofits that promote live music in Seattle and across the state.
Cowan's small Ballard bar wasn't the only Seattle venue hit with the obscure "Opportunity to Dance tax," a somewhat confusing sales tax applied to ticket sales for live musical acts, including DJs, at venues that have a dance floor. (Weirdly, the DOR says the tax doesn't apply to live concerts at venues like the Gorge.) As I wrote when the controversy first erupted, at least four other music-related spaces were also charged back-taxes for having dance floors, including the popular Capitol Hill gay dance club, Neighbours.
"All clubs that offer dancing should be collecting sales tax on their cover charges," stresses DOR spokesman Mike Gowrylow. If they're not, their non-compliant. He says that if a club is confused whether or not they should be collecting the tax, "they should write us a letter and ask us."
The bill hasn't yet been scheduled for a hearing in the Senate Ways and Means committee. It also currently only has four sponsors, which doesn't speak to wide support. (The bill is also missing a fiscal note, so it's unclear what the budgetary impacts of exempting venues from the tax would be.) But Meinert says the SMNA has teamed up with the Washington Restaurant Association, the Pacific NW chapter of the Recording Academy, and Washington arts organizations to educate venue owners and nonprofits throughout the state who could be affected.
"I think a lot of clubs don't understand that this effects everyone with a dance floor, not just Seattle venues," says local music promoter and Seattle Music and Nightlife Association member Dave Meinert. "The DOR wants to tax line dancing. I think we'll get the bi-partisan support we need to pass this."